OBJECTIVE—The purpose of this study was to investigate whether adiponectin concentrations and biomarkers of inflammation, endothelial dysfunction, and insulin resistance mediate the association between alcohol consumption and diabetes. RESEARCH DESIGN AND METHODS—In a nested case-control study of 705 women with incident diabetes and 787 matched control subjects, we examined the adjusted relationship between baseline alcohol consumption and risk of diabetes before and after adjustment for markers of inflammation/endothelial dysfunction (C-reactive protein, vascular cell adhesion molecule-1, intercellular adhesion molecule-1, E-selectin, tumor necrosis factor-α receptor 2, and interleukin-6), fasting insulin, and adiponectin concentrations. RESULTS—Alcohol consumption was associated with a decreased risk of diabetes (odds ratio per 12.5 g/day increment in alcohol use 0.58; 95% CI 0.49–0.69; P < 0.001). Adjustment for BMI attenuated the association by 25%. None of the markers of inflammation or fasting insulin appeared to account for >2% of the observed relationship. Without adjustment for BMI, these biomarkers individually explained slightly more of the association, but <10% in all cases. Adiponectin accounted for 25% in a fully adjusted model and for 29% without adjustment for BMI. CONCLUSIONS—In this population of women, alcohol consumption was inversely associated with risk of type 2 diabetes. Adiponectin appeared to be a mediator of this association, but circulating biomarkers of inflammation, endothelial dysfunction, and fasting insulin did not explain this association. These results suggest that further research is needed into the potentially mediating roles of other biomarkers affected by alcohol consumption.